NEW YORK, May 31 (Reuters) - Coca-Cola Co andMcDonald's Corp slammed a proposed limit on soft drinksales in New York City that would turn a small McDonald's drinkinto the new large and could trigger a wave of similarrestrictions aimed at curbing obesity.

"New Yorkers expect and deserve better than this. They canmake their own choices about the beverages they purchase,"Coca-Cola said in a statement on Thursday. Coke dominates theU.S. fountain drink market, and would likely be the most hurt.

On Wednesday, Bloomberg proposed amending the city's healthcode to ban the sale of soft drinks in cups larger than 16ounces, a size equal to what McDonald's calls small. The chain'smedium is 21 ounces, and its large is 32 ounces. Its kids' sizeis 12 ounces.

"This raises the specter of this going to other cities aswell," said Bernstein Research analyst Ali Dibadj. "Thesecompanies may have to start playing whack-a-mole if this gainsmomentum."

The ban would apply to restaurants, mobile food carts,delicatessens and concessions at movie theaters, stadiums andarenas where sales of fountain drinks are common. It would notapply to convenience, grocery or drug stores, which mostly sellbeverages in bottles and cans.

The proposal, which would exclude diet and dairy-basedcoffee drinks, must be approved by the city's Board of Health.

"You can still be obese. We're not keeping you from eatingfattening foods or drinking 32-ounce bottles of full-sugardrinks," Mayor Bloomberg told the All Things Digital gatheringin Rancho Palos Verdes, California on Thursday via videoconference. "We are just telling you that this is detrimental toyour health and making you understand that by portion size."

Bloomberg's assault on super-sized sodas opened a new frontin the battle over how local governments regulate in the name ofhealth what people eat and drink.

Public health advocates who have been fighting America'sgrowing obesity problem say portion control is key to weightmanagement.

"There's very strong scientific evidence that when peopleare served more they eat more, or in this case drink more," saidKelly Brownell, director of Yale University's Rudd Center forFood Policy and Obesity. Brownell applauded the proposal.

"My guess is this will affect enough people in a strongenough way to create a pretty significant public healthbenefit," he said.

Dr Pepper Snapple Group Inc did not return a callfor comment. PepsiCo Inc referred questions to the NewYork City Beverage Association, which characterized the proposalas zealous and unlikely to work.

"The city is not going to address the obesity issue byattacking soda because soda is not driving the obesity rates,"said Stefan Friedman, an association spokesman.

INDUSTRY CHALLENGE

Beverage companies have several arguments on which to basepossible legal challenges, including that the ban would affectinterstate commerce by impacting supplies such as soda syrup andcups, said Marc Scheineson, a former associate commissioner atthe U.S. Food and Drug Administration and head of the food anddrug practice at the Washington, D.C. law firm Alston & Bird.

That argument could be outweighed by the city's interest inpublic health, he said.

Other Bloomberg initiatives to improve public health, suchas forbidding smoking in restaurants and requiring chainrestaurants to post calorie counts, were the subject oflawsuits, but the city prevailed.

Regardless of whether it mounts any legal challenges, theindustry is likely to spend a lot of money fighting the proposallike it has fought ongoing efforts to tax soft drinks, said TomPirko of Bevmark Consulting.

"This is a challenge to the basic premise of their businessplan, all predicated on selling sweet drinks in the largestvolumes possible," Pirko said.

"New York is a mega-market, but more importantly it is NewYork. It sets the pace. What happens in New York has a stronginfluence on the rest of the country," he said.

Coke controls 70 percent of the U.S. fountain drink market,according to Beverage Digest, followed by Pepsi with 19 percentand Dr Pepper Snapple with 11 percent.

Fountain business accounts for about 24 percent of the 9.3billion cases of soda sold a year, Beverage Digest said, in amarket worth $75.7 billion.